Donate Now Button a Problem?

Recently I facilitated a discussion about online fundraising in one of our Impact Circles. It’s fair to say that about half of the Executive Directors present did not know that the majority of the laws about charitable fundraising are controlled at the state level. At the time of this writing, there are approximately 40 states and cities with laws designed to protect their citizens from illegal solicitation, primarily from scams conducted by organizations posing as charities. The majority of the laws say that charities must register before solicitation of funds – before they can ask donors to give money.

I am not an attorney, nor am I attempting to practice law. Therefore if you are interested in raising funds online in any way, you should consult and obtain advice from your charity’s legal advisor.

Online Solicitation

In 2011, The Charleston Principles were published, the result of a conference of the National Association of Attorneys General/National Association of State Charity Officials (“NAAG/NASCO”) Conference in Charleston, South Carolina in October 1999.

A primary purpose of the conference was to agree to guidelines for fundraising by charities and to try to standardize the rules at the state level. The paragraphs quoted below summarize the output as it relates to online solicitation, and is quoted from the National Association of State Charity Officials (NASC) final paper:

Entities That Are Domiciled Within the State 1. An entity that is domiciled within a state and uses the Internet to conduct charitable solicitations in that state must register in that state. This is true without regard to whether the Internet solicitation methods it uses are passive or interactive, maintained by itself or another entity with which it contracts, or whether it conducts solicitations in any other manner.

An entity that is not domiciled within a state must register in accordance with the law of that state if:

a. Its non-Internet activities alone would be sufficient to require registration;
b. (1) The entity solicits contributions through an interactive Web site; and
- (2) Either the entity:
  - i. Specifically targets persons physically located in the state for solicitation, or
  - ii. Receives contributions from the state on a repeated and ongoing basis or a substantial basis through its Web site.; or
c. (1) The entity solicits contributions through a site that is not interactive, but either specifically invites further offline activity to complete a contribution, or establishes other contacts with that state, such as sending e-mail messages or other communications that promote the Web site; and
- (2) The entity satisfies Principle III(B)(1)(b)(2).

Registration for Online Fundraising

So, what do you do? First, make sure you are legally registered in the state where your main office is located. Your state most likely has a position on this subject. For example in Florida, most nonprofit organizations are required to post the following on their website (and every printed solicitation, written confirmation, receipt or reminder of contribution) with the respective registration number issued by the department.

“A COPY OF THE OFFICIAL REGISTRATION AND FINANCIAL INFORMATION MAYBE BE OBTAINED FROM THE DIVISION OF CONSUMER SERVICES BY CALLING TOLL-FREE (800-435-7352) WITHIN THE STATE. REGISTRATION DOES NOT IMPLY ENDORSEMENT, APPROVAL, OR RECOMMENDATION BY THE STATE”

This does not apply to bona fide religious or educational institutions, government agencies, or political groups. In Florida, donors and nonprofits can verify their listing by going to the “Charity Giver’s Guide” of Florida Department of Agriculture and Consumer Services.

Registration for fundraising is not necessarily the same as registering a nonprofit corporation within the state. In Florida,for example, the registration for fundraising is an annual requirement that also requires a submission of financial results (Form 990) with a different state agency. You should check to see what the requirements are in your state. (See an example in the sidebar of our website)

Second, you need to consider if there are any other states in which you should be registered. In Florida, we have a significant population of visitors who winter here, and they do participate in fundraising activities for charities in Florida. If you are soliciting their donations online, you may have a liability in the state where they hold residency. This could require annual registration with a fee as well as a requirement to submit financial reports.

The Donate Now Button

So about that shiny Donate Now button that is telling you that you don’t have to ask anyone for money, just post the button, and your financial worries are over. I suggest that you think it through.

In my opinion, the right thing to do is to respect your donors first by being accurate in describing what it is that you do, and second, by displaying the jurisdictions within which you are registered as a charity. And if you are Florida, make sure each page that carries the Donate Now button has the required phrase displayed.

Your next step should be to review your direct mail solicitation list, and if you automatically add all donors to your solicitations make efforts to be very aware of the location from which the donation has come as well as the address to which you send the receipt and acknowledgment of the gift. It then becomes easier to make decisions for each state. For example in some states, no registration is necessary until receipts exceed $25,000, in others you may be required to register before receiving your first dollar.

The reason to be careful about direct solicitations is that, although you may slide by receiving a donation out of the blue, if you then solicit that individual via email, you have two strikes against you in the solicitation column.

Single Portal

One of the outputs of the Charleston Principles was a recommendation that a single electronic form is created that each state would accept for registration purposes. Many states agreed to accept it; most, however, wanted a hard copy of the form, along with additional information, plus your 990 form.

This past year the National Association of State Charity Officials put out a request for proposals for an online Single Portal, which would standardize the requirements among the states. The hope is that they can make life easier for charities, especially smaller ones, to abide by the laws in place.

As this information is being posted the state Attorneys General and the state charity officials are meeting in Washington. The primary topic for the meeting is “The Evolving World of State Charities Regulation.”

Update: September 2017

There has not been any reported progress on the MultiState Single Portal project. The last note was posted in February 2017 “Continued Progress Towards a Single Portal“. We are trying to get someone from the projects to come on our show “What’s New in NPTech” — @bph